MUMBAI: Cyrus Mistry may challenge the power of Tata Trusts to influence business decisions at the Tata group as the battle for control at the conglomerate drags on. Mistry had been ousted as chairman of holding company Tata Sons on October 24, sparking a power struggle with predecessor Ratan Tata, who's taken over as interim chairman.

The philanthropic trusts, controlled by Ratan Tata, own about twothirds of Tata Sons while the Mistry family's Shapoorji Pallonji group has an 18.4% stake in the holding company. There are concerns about the governance structure of the trusts, said an executive close to Mistry.

"A charitable trust is allowed to hold investments but cannot directly be involved in business plans. It is about institutionalising a role and ensuring proper governance," said an executive close to Mistry. "The chairman of Tata Sons and Tata Trusts should be different, so that nobody has unbridled power."

The question is whether a charitable trust can influence the businesses of operating companies under the law, executives said. "We don't interfere with the day-to-day governance of Tata Sons," said VR Mehta, a trustee on the Sir Dorabji Tata Trust. "There is certain information we require from Tata Sons to make sure our investments are safe as it the primary source of our philanthropic operations."

A few months before Mistry's ouster, directors on the nomination and remuneration committee (NRC) of Tata Sons — Ronen Sen, Vijay Singh and Farida Khambhata — said at a board meeting that it may be desirable to seek legal opinion on the interplay of relevant entities such as Tata Sons, Tata Trusts and group companies.

When he was chairman of Tata Sons, Ratan Tata headed the trusts as well. At the time Mistry took over at Tata Sons, a pact was signed between the holding company and the Tata Trusts clarifying the relationship between the two, said Mehta.

But people close to Mistry denied the existence of such an agreement. Incidentally, Sen and Singh backed Mistry's ouster at the October 24 board meeting of Tata Sons.

Mistry's team is said to have prepared a governance report on issues related to the group’s structure but was removed before he could present it, said the person cited above.

In his first response after the dismissal, in the form of a letter to Tata Sons and the Tata Trusts, Mistry made references to the role of the trusts in operational areas. After the Rs 10,000-crore deal to buy Welspun Renewables was concluded, a series of discussions took place in the presence of Ratan Tata and trustee NA Soonawala.

"These discussions included much more detailed interaction with the merchant bankers to the transaction," the October 25 letter had said. "Soonawala had strong views on how this listed operating company must structure its transaction and proceeded to have further meetings with the merchant banker."

A Tata Sons spokesperson said the shareholding of the two key trusts in Tata Sons was fully compliant with the Maharashtra Public Trusts Act and the Income Tax Act.

"The shareholding in Tata Sons held by the Trusts is permissible under the IT Act and do not pay income tax," Tata Sons said. "The trusts have investments in share capital of Tata Sons. To protect this major asset, the trusts have representation on the board of Tata Sons through professionals of high repute. The trusts act in accordance with the company's articles."

Public trusts are usually barred from holding shares of commercial business by the Maharashtra Public Trusts Act's 1973 amendment. They are allowed to invest in banks and postal savings accounts and can otherwise lose tax exemptions.